American economist Emmanuel Saez has painstakingly assembled a century-long statistical series on U.S. income distribution. On two occasions, the share of income captured by the richest 1 per cent reached about a quarter of the national total. The first time was in 1928, the second in 2007. As we all know, both peaks in wealth concentration were followed by financial catastrophe and depression. Indeed, maldistribution clearly contributed to both meltdowns.
But there's a startling difference in the political reverberations that followed the two conflagrations. In the 1930s, outrage at the pre-Depression extravagance of the rich, contrasting with the dislocation experienced by masses of Americans, sparked a decade of left-leaning foment. Government expanded income security, directly hired millions of unemployed, and actively supported a new generation of unions to fight for the common folk. Meantime, it reined in business excess through tough financial rules, anti-trust policies, and high taxes on the rich.
This time around, there's been plenty of populist anger - but (so far) it's been steered in exactly the opposite direction. Social supports and public employment are being cut dramatically (especially by U.S. state and local governments). Barack Obama's election promise to modernize labour laws and rebuild unions was dead - even before he lost Congress. And several state governments are now preparing a full assault on union rights: Recent proposals in Ohio and Wisconsin would virtually outlaw collective bargaining across broad swaths of the public sector.
The richest 1 per cent almost tripled their share of U.S. national income since 1978, gobbling two-thirds of the income gains generated in the whole economy over the past decade. With numbers like these, highlighting the incomes of the ultra-rich is no longer an idle, envious pastime. The concentration of wealth at the top has become macroeconomically significant.
Recession or no recession, the gravy train at the top hasn't paused for breath: Executive bonuses keep rising, and the top 25 hedge-fund managers made a staggering $1-billion each in 2009. Nevertheless, the trend in U.S. politics is not to challenge the contrast between the top and the bottom, but to reinforce it. The Tea Party portrays government itself as the problem. And rather than empowering average workers to improve their lot (like the Wagner Act did in 1935), America's rightward lurch in labour relations will reinforce the stagnation at the bottom.
Canada is a kinder, gentler, fairer place. So the numbers aren't as extreme. Or are they? Here, the richest 1 per cent (less than 250,000 tax filers) capture 17 per cent of total income, and that share has merely doubled (not trebled) since the egalitarian 1970s. A full third of all income gains across Canada since 1987 have gone to that lucky group. For the ultra-ultra-rich (the top 0.1 per cent of families, 25,000 in total, with average income of $1.5-million), their share of national income has trebled to 6.5 per cent.
Despite this largesse, in Canada, too, the political bandwagon lurches to the right. There's been infinitely more hot air expended since the financial meltdown over the salaries of unionized garbage collectors than those of high-flying financiers. Our home-grown plutocracy, meanwhile, keeps raking it in. Bonuses at the Big Six banks alone reached $8.9-billion in 2010, the highest ever. The Canadian Centre for Policy Alternatives recently documented that the typical Canadian CEO made as much by 2:30 p.m. on Jan. 3 as the average worker makes all year long.
Imagine a city the size of Saskatoon hogging a third of all the new income generated by the entire country. Imagine folks who earn as much in a few hours as the rest of us do in a year - yet still lecture us on the need to tighten our belts. Imagine 25,000 families earning as much as the bottom seven million tax filers put together. How long will these excesses fly under the public's radar, while we bicker over wage gaps between unionized garbage collectors and non-union fast-food workers? Not long, I hope.
Jim Stanford is an economist with the Canadian Auto Workers union.